If you are in anyway involved in the healthcare contracting process, you know the tremendous challenge that providers, manufacturers and distributors face when attempting to manually align data for pricing accuracy. With thousands of price changes happening each day, all parties to a contract spend an enormous amount of time and money trying to keep up with them.

From the distributors’ perspective, because they receive contract price notifications from manufacturers in a variety of formats, staff members must manually load them into their systems. This inefficient, labor-intensive process drives significant cost, waste and errors. Downstream it impacts their customers—healthcare organizations—through inaccurate pricing and rework in an attempt to get it right.

The Health Industry Distributors Association (HIDA), recognizing the industry need for standardization in the contracting process, collaborated with stakeholders from throughout the healthcare supply chain to define a standard for electronic Price Authorization Acknowledgements (845s). During the 2018 GHX Healthcare Supply Chain Summit, representatives from Cardinal and McKesson described their roles in shaping this standard, and how they are putting it to work.

Cardinal Health’s Story

In 2017, more than 70 percent of Cardinal Health’s contract updates were done manually, explained Dana Thacker, Director, SAP Order Fulfillment - Medical Business, Cardinal Health. His team touched 22 million lines, making the process extremely slow and prone to errors. Problems with incorrect price loads cascade into problems across the supply chain, ultimately affecting customers and their patients.

Recognizing the severity of the problem, Thacker and his team secured internal alignment at Cardinal across senior levels of leadership — IT and business — to make implementation of the HIDA 845 standard a priority. GHX made the standard a priority as well, partnering with Cardinal, McKesson and other industry stakeholders on the development of the GHX Single Channel solution, which applies standardization, automation and timing to the contract price notification process.

By implementing the HIDA 845 standard, facilitated by the GHX Single Channel solution, Cardinal Health has achieved a 43 percent improvement in lines automated, eliminating 38,000 hours of annual labor to manually load those lines.

McKesson’s Story

Justin Bowers, Vice President, Contract Administration, McKesson Financial Center, explained how McKesson’s story was very similar to Cardinal Health’s. With 500 manufacturers sending 500 different contract price notification templates, McKesson’s 250+ person contract administration team spent most of their time heads down manually keying in data.

Bowers raised the issue to McKesson’s executive leadership team and made alignment with the HIDA 845 standard a major objective for 2017, tying performance metrics to the initiative. He notes that they deepened their relationship with the GHX team, not only by implementing the Single Channel solution, but also by collaborating with GHX to educate manufacturers on the need for an automated, standardized and efficient contract price notification process.

Through this work, McKesson increased its line automation by 683 percent (from 6%-41%), with the goal of reaching 80 percent automation in 2018.

Lessons Learned

During the Summit session, Thacker and Bowers offered up the following three keys to success when implementing the HIDA 845 standard with trading partners:

It takes work: These results don’t just happen. It takes communication, persistence, and grit to move towards your goal.

It takes communication: This is a major undertaking so trading partners should be up front about the challenges they may face and set timelines to get through them.

It takes testing: When transitioning from manual to automated 845s, trading partners can’t simply flip a switch. They have to perform testing to identify and address issues before full implementation.

Healthcare contract price accuracy is complicated. Automation tackles the big issue of getting corrections but as noted, communication and persistence can’t be overlooked for continued success. Read more on the Healthcare Hub about this topic.